UPI Charges!?
Introduction
If you’re living in India, there’s a good chance you’ve used the Unified Payments Interface (UPI) at least once in your life. UPI has become the go-to payment method for everything from buying groceries to paying your electricity bill. But there’s one thing that’s been bothering everyone lately: UPI charges.
What is UPI?
Unified Payments Interface (UPI) is a real-time payment system developed by the National Payments Corporation of India (NPCI) that facilitates inter-bank transactions by instantly transferring funds between two bank accounts on a mobile platform. UPI is built on top of the Immediate Payment Service (IMPS), which is a real-time interbank electronic fund transfer service.
UPI allows users to link multiple bank accounts to a single mobile application and make transactions using a virtual payment address (VPA) or mobile number, without the need to share bank account details. UPI supports various types of transactions, including person-to-person (P2P) transfers, person-to-merchant (P2M) payments, and bill payments.
UPI has become a popular payment method in India due to its ease of use, speed, and convenience. It has also played a significant role in promoting digital payments and financial inclusion in the country.
Current Scenario
Let’s face it, UPI charges are like that annoying mosquito that just won’t go away. You think you’ve swatted it, but it comes back to bite you again. And again. And again.
First, there’s the transaction charges. Want to transfer money to your friend? That’ll be 0.25% of the transaction amount, please. Want to pay your credit card bill? That’ll be 0.65% of the transaction amount, please. Want to donate to your favorite charity? That’ll be 0.30% of the transaction amount, please. It’s like UPI charges are trying to make us bankrupt, one transaction at a time.
But wait, there’s more! Have you ever tried to make a UPI payment using a non-UPI payment method? You know, like net banking or debit/credit cards? That’ll be an extra charge, please. It’s like UPI is saying, “Oh, you don’t want to use UPI to make a payment? Well, we’ll just charge you extra for that. Ha!”
And let’s not forget about the UPI limit charges. Yes, UPI charges you if you exceed your daily transaction limit. It’s like UPI is saying, “Oh, you thought you could use our payment method as much as you want? Nope, we’re going to charge you extra for that privilege.”
Certain Clarifications On Present UPI Charges
According to the National Payments Corporation of India (NPCI), there is no charge for bank account to bank account-based UPI payments or normal UPI payments. However, interchange charges are only applicable for prepaid payment instruments (PPI) merchant transactions and there is no charge to customers. NPCI has permitted PPI wallets to be part of the interoperable UPI ecosystem and levied a 1.1% charge on UPI transactions above ₹ 2,000 while using PPI. Bank account-to-account transactions continue to remain free for customers and merchants.
For loading money into wallets using UPI there will be no charge as long as amount is below Rs 2000 irrespective of how many times the user loads money. For loading over Rs 2000 there will be a 0.15% fee which works out to Rs 3 on Rs 2000.
Now, the question is, why do PPIs have to pay interchange fees while bank account-based transactions are free? To answer this, we need to understand the role of PPIs in the UPI ecosystem.
PPIs are digital wallets that allow users to store money and make payments. They are not linked to a bank account but are issued by non-bank entities. PPIs act as intermediaries between the user and the bank, and facilitate transactions.
They charge customers for adding money to the wallet, withdrawing money from the wallet, and for making payments. Since PPIs are not regulated like banks, they are subject to more stringent regulations, and this includes the requirement to pay interchange fees.
But, why are interchange fees necessary? Interchange fees are charges that one bank pays to another bank when a customer uses their card or digital wallet to make a transaction.
These fees cover the cost of processing the transaction, fraud prevention, and other services. In the case of UPI transactions, the interchange fee is paid by the PPI to the bank that issues the customer’s UPI ID.
Now, let’s talk about the 1.1% charge on UPI transactions above ₹ 2,000 while using PPI. This charge has been levied to cover the cost of maintaining the UPI ecosystem and to ensure that PPIs contribute to the development of the payment infrastructure. However, this charge has not gone down well with PPIs.
Paytm, one of the leading PPIs in India, has expressed its dissatisfaction with the 1.1% charge. According to Paytm CEO, Vijay Shekhar Sharma, “The 1.1% fee is a disincentive for PPIs to offer UPI services to their customers. We are already paying MDR (Merchant Discount Rate) to banks for processing transactions. Adding another fee on top of that is unfair.”
On the other hand, banks argue that PPIs have been given the freedom to offer UPI services to their customers and charge for it. The interchange fee is a way to ensure that PPIs contribute to the development of the payment infrastructure.
According to Rajeev Agrawal, CEO of Innoviti Payment Solutions, “PPIs have been given a free ride on the UPI network. They should contribute to the cost of maintaining the infrastructure.”
So, who is right? Should PPIs be exempt from interchange fees or should they contribute to the development of the payment infrastructure? The answer is not simple.
On one hand, PPIs provide a valuable service to customers by offering a digital wallet that is convenient and easy to use.
On the other hand, banks have invested heavily in the UPI infrastructure, and it is only fair that PPIs contribute to the cost of maintaining it.
Conclusion
UPI charges may seem like a small annoyance, but they can add up over time and become a significant expense. While there are no charges for bank account to bank account-based UPI payments or normal UPI payments, interchange charges are applicable for prepaid payment instruments (PPI) merchant transactions.
It’s important to stay informed about the different types of UPI charges and how they apply to different types of transactions so that you can make informed decisions about how you use UPI. By being aware of the charges and using UPI wisely, you can continue to enjoy the convenience and speed of this popular payment method without breaking the bank.
What are your thoughts on UPI Charges? Let me know in the comments below! Is there anything you would like me to cover in more detail? Leave a comment and let me know!
